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Evaluate The Influences Of Performance Management Commerce Essay

Paper Type: Free Essay Subject: Commerce
Wordcount: 5445 words Published: 1st Jan 2015

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The principle objective of this dissertation is to analyse and evaluate the influences of performance management (PM) in a Hospitality Organisation as well as the impact on employees and the organisations overall growth. The analysis also aims on demonstrating how performance evaluation provide helpful guidelines in assessing, evaluating and appraising employees performance in a Hospitality industry and rewarding or providing them with training and development where needed. The paper also explains how goal setting theory helps motivate employees when applied in order to perform better in a Hospitality industry. Therefore, the study aims on the impact of Performance Management on the employees and Hospitality organisation overall growth.

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In the past few years, the Hotel Industry has come across numerous changes. It suggests that no industry is resistant to resulting consequences of deregulation or the increasing growth of global competitors. One of the results of this progression in many hospitality organisations is the increase in reasonable obsession with quality and productivity. Hence, it is currently more essential to measure performance accurately in order to reward the employee and guide if any performance related problems through training and development. (Swan & Margulies, 1991:3)

Few decades ago, performance management was a primitive process and widely used to distinguish between good and bad performers. Whereas, now performance management is a vital factor in many job types and levels. Performance Management is not only used to distinguish but also to make various decisions about salaries, promotions and analyse the employee performance related problems in order to counsel and implement appropriate strategies to archive the Organisations objectives.

The conventional approach, unless handled with consummate skill and delicacy, constitutes something dangerously close to violation of the integrity of the personality.

Managers are uncomfortable when they are put in the position of “playing god” the respect we hold for the inherent value of the individual leaves us distressed when we must take responsibility for judging the personal worth of a fellow man. Yet the conventional approach to performance management forces managers, not to only to make such judgments and to see them acted upon, but also to communicate them to those who had been judged. (McGregor, 1957:37)

The “conventional” approach McGregor worried about is the practice of periodically determined whether and to what extent a given person has lived up to certain predetermined requirements. It is the “playing god” aspect that concerns managers the fear that what gets put on a piece of paper might spell the end of a man’s career, or the dashing of his hopes and aspirations (McGregor, 1957:38).

(McGregor, 1957:40) saw what so many managers have reported about performance management: that it is tricky, often subjective, and in many ways dangerous thing to do.

These managers feel that there is something inherently wrong with “judging” a man or woman. There are dreadfully afraid of making a once-and-for-all judgment which turns out to be wrong, and they are as much or more afraid of having to tell someone they are going to give him or her a “low rating” (McGregor, 1957:38).

The key purpose of PM in organizations is that it helps in; measuring the effectiveness of performance in the organization also, it helps in identifying training needs and largely promotes motivation towards work. But, how exactly does performance management help in running the organization? Every organization has a set of objectives and functions and the main task is to accomplish the desired objectives and functions. This can only be achieved, if the employees know their duties well. Employees form an important asset of the company, therefore they should be provided with a proper package, remuneration and good training and development. All these facilities will only help the employee to be highly motivated towards their work and would help in producing the right output i.e. performance.

Performance management is used all over the world. Many organizations use PM in order to develop a clearer picture of their organization. The process allows an organization to measure and evaluate an individual employee’s behaviour and accomplishments over a specific period of time (DeVries et al., 1981).In recent years the attention towards performance management has increased rapidly, due to its important potential implications ,relating to fair employment practices and the because of increasing concerns about employee productivity in the organization.(Pearce and Porter,1996 ) What ultimately lies is the end product which is performance which has to proper, therefore, in order to achieve that, the employees should be utilized to the full extent.

Organizations have to be organized and systematic in their approach, so that they can extract the exact performance from their employees which can help them, to create a balance between performance and organizational objectives.

Performance management : Overview

The primary function of performance management is inform employees about the job, the effort needed to satisfy the job title, work ethics and attitude expected from them.

Performance management not only strive to assist individuals and the organizational performance but also formulates a baseline for future planning and strategies. The following are the main purposes of PM:

Establish a common vision among the employees by communicating the Hospitality organisations objectives about customer service and satisfaction through a mission statement.

Allocating of individual performance target parallel to the overall organizational targets.

Generate a formal assessment of the progress with regards to the targets and where necessary provide training.

Periodic assessment to evaluate the PM effectiveness towards the organizations overall performance and development. (Coates,1994)

According to McEvoy and Cascio (1990), the employees of the organization should be informed about their duties i.e they should be made aware of what is expected from them and have effective orientation approaching effective performance. Hence, the purpose is to provide the employees with essential information about their job and motivate them to work towards organisational objectives and goals. Employees find it easier when objectives are set in order to achieve targets. Locke’s (1968) Goal setting theory suggests that employees’ performance can be determined by the conscious goal levels. The theory is summarized as follows:

High level of performance is produced when hard goals are set than easier ones.

Higher levels of output are achieved due to few hard goals.

Behaviour is highly regulated by intentions.

How widespread is performance management?

Performance management is commonly used in most of the Western countries. From 1970 to 1980, in US the percentage of Hospitality Organisations using performance management increased from 89 % to 94% (Locher and Teel, 1988). In UK, similar to US experience a rapid rise in the use of PM (Armstrong and Baron, 1998). Big sectors such as Financial Services and Hospitality Industry in the UK prominently use appraisal. Cully et al (1998) suggested that the development of PM was primarily towards middle managers and few professional industries but todays is widely applied to non-managerial works and professionals. Developing countries like China, India, Hong Kong and japan are readily accepting and using PM.

Objective of the study:

The aim of this study is to explore the operation and effects of performance management in Multinational Company. It will assess whether the appraisal process creates a positive response or negative response from employees and assess the subsequent impact on employee attitudes and behaviours. The appraisal process studied is that of a Multinational company in UK. The appraisal system of this company was designed to improve employee productivity. The findings, suggests that the performance management system is important in the Multinational company among employees and the organization. The study also explains how performance management systems have encouraged employee development in the organization considered. An over view of the existing literature relevant to this topic is considered in the following chapter.

Structure of the Dissertation:

Chapter 1: Introduction:

A brief introduction about the purpose of the research is given. A brief overview of performance management is presented. Then the research objective is mentioned. Then a brief description about the remaining chapters is given.

Chapter 2: Literature review:

Chapter 2 comprises of Literature review. It starts with the history of performance management system. It explains how performance management system was evolved in the industry and what its current importance in the industry is. The chapter then, explains 10 the various concepts relevant to the subject. The purpose and perception of appraisal system is explained. This is followed by the process of performance management. The literature review was designed to explain the main motive of the research, therefore accordingly the relevant literatures pertaining to the research was only considered.

Chapter 3: Research methods

Chapter 3 comprises of research method adopted in the research. This chapter gives an overview of the research and the research objective. It then explains the purpose of qualitative research adopted in the research. It then highlights the relationship between the study and the research method adopted. The majority of the chapter explains how the data was collected for the research and the process of data analysis.

Chapter 4: Analysis of Data

Chapter 4 comprises of the Analysis section. This section gives a brief introduction to the parameters on which the employees are tested in the organization and the scale on which they are judged are explained. This chapter then explains the findings of the research. This section broadly explains the reaction of the employees, of the appraisal system of their company.

Chapter 5: Conclusion

Chapter 5 concludes the research by stating briefly the findings of the research and sums up the whole research. The conclusion also suggests recommendations for future.

Chapter 2


Performance management (PM) can be defined as the goal-oriented process that makes sure that the organisational processes work towards enhancing productivity of the employees and the organisation. It is an essential factor in achieving organisational objectives through measuring and improving the significance of the workforce. PM also consist of incentive goals and the corresponding incentive values which helps the relationship between performance and incentives.

The major focus in Business these days is performance management system. Even though the primary role of every HRM department is to contribute to performance, it is also important to provide training and performance appraisal. PM is a dynamic continuous cycle, unlike performance appraisal that arises at a specific time. In an organisation, every member or employee is a part of the on-going cycle. Every element of the PM system i.e training, appraisal and remuneration is associated and works towards the organisational effectiveness and each member works should be guided in accomplishing the set goals of the organisation. However, it is crucial to provide necessary training to improve the worker’s skills where needed as there is a direct co-relation between training and achieving organisational effectiveness. Additionally, there is a close relation between wage and performance in achieving organisational objectives.

As said by Robert J. Greene, CEO of Reward Systems Inc, “Performance management is the single largest contributor to organizational effectiveness. If you ignore performance management, you fail.” It is important that organisations to more strategic approach when dealing with performance appraisal. Therefore, the organisation should avoid “check the box, write a comment” ritual, and incorporate its mission statement and visions to the PM system.

Performance Appraisal

Performance Appraisal (PA) can be described as a formal process of assessment and evaluation of the employees on an individual as well as group level. The word “formal” is crucial, as it is important that the managers or supervisors review the worker or individual on a periodic basis. Even though, PA is only an element of performance management, it is very crucial for the success of performance management as it directly relates to the strategic plan set by the organisation. It is critical to evaluate team performance in many organisations where teams exist but PA in most companies concentrates on individuals. As emphasized, achievements, objectives and strategic plans set for development can be examined and evaluated by an effective PA system.

Although PA is somewhat considered as negative, unpopular and managers try to avoid the efficiency it provides. Not many Employers like conducting PA and workers dislike receiving them especially when it’s negative. Studies suggest that around 80% of workers are not satisfied with the PA system. Hence, if that is the case, why is it not yet eliminated? The sole reason why PA should not be eliminated is because it offers various opportunities to improve results and efficiency in an organisation which is important in today’s global marketplace which is highly competitive. Therefore, eliminating PA would be considered as a risky decision. Avoiding PA could also cause legal ramifications. Even after all the consideration, development of an effective PA system will always be an important function in management.

Uses of Performance Appraisal

In many organisations, an appraisal system assists in achieving numerous goals. However, in few firms PA is used in measuring and improving individual as well as organisational performance. The most common issue with PA is that a lot is expected from one form of PA system plan. For instance, a plan that is strategically designed to improve and develop employee skills may not be used in deciding wage increases. Although, if an appraisal plan is well designed it can be used in accomplishing the set objectives as well as performance.

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Human Resource Planning

It is important to record data/information of employees in a firm so that it is easy to identify the potentials of who deserves to be promoted or have any area to improve. PA also helps in revealing if there is insufficient number of workers. An appraisal system should be designed and planned after considering the strengths and weaknesses of the HRM of the organisation.

Recruitment and Selection

Through the process of performance analysis, organisations can determine the performance potential on an applicant. Studies show that successful employees display specific behavioural traits while performing tasks. The data processed through performance evaluation help in setting standards for behavioural interviews. In the process of selection process, the employee rating can also be used as a variable against which test scores are compared.

Training and Development

Training and development is crucial for any employee as it acts as way to communicating what is expected and how. PA helps in drawing attention to these specific needs of training. For example, if an employee’s job involves the skill of creative writing and by the process of evaluation it reveals that he or she lacks in it or has poor knowledge about it, the employee will need appropriate training sessions. When managers of a firm lack the capability of administering disciplinary action, they need the necessary training to deal with this problem. Hence, identifying deficiencies and obstacles can be overcome by T&D sessions which develop and improve individual’s skills allowing them to perform better. An appraisal process does not train and develop individuals but determines the training needed by providing data.

Career Planning and Development

Career planning can be described as a never-ending cycle in which an individual sets profession goals and means to achieve them throughout his or her lifetime. However, career development is a more formal approach used by organisations. It involves recruiting suitable qualified and experienced people when required. PA can determine an employee’s potential through assessing its weaknesses and strengths. The data is also useful to counsel junior staff member and assisting in career plans.

Compensation Programs

PA evaluations help in making decisions dealing with wage or salary regulations. It is believed that organisations should reward employees with increase in pay when excellent performance is achieved. In order to increase performance, an organisation should implement well planned and designed PA systems and award the efficient workers. This not only increases performance but also keeps employees motivated to achieve better in future..

Internal Employee Relations

PA evaluation can provide crucial information used in making decision about the internal employee relations i.e promotion, demotion, transfers and dismisses etc. For example,

Performance appraisal data are also used for decisions in several areas of internal employee relations, including promotion, demotion, termination, layoff, and transfer. For example, an employee’s performance in one job may be useful in determining his or her ability to perform another job on the same level, as is required in the consideration of transfers. When the performance level is unacceptable, demotion or even termination may be appropriate.

Assessment of Employee Potential

Some organizations attempt to assess an employee’s potential as they appraise his or her job performance. Although past behaviours may be a good predictor of future behaviours in some jobs, an employee’s past performance may not accurately indicate future performance in other jobs.

The best salesperson in the company may not have what it takes to become a successful district sales manager, where the tasks are distinctly different. Similarly, the best systems analyst may, if promoted, be a disaster as an information technology manager. Overemphasizing technical skills and ignoring other equally important skills is a common error in promoting employees into management jobs. Recognition of this problem has led some ¬rms to separate the appraisal of performance, which focuses on past behaviour, from the assessment of potential, which is future-oriented.

Performance Appraisal Process

As shown in Figure 8.1, the starting point for the PA process is identifying speci¬c performance goals. An appraisal system probably cannot effectively serve every desired purpose, so management should select the speci¬c goals it believes to be most important and realistically achievable. For example, some ¬rms may want to stress employee development, whereas other organizations may want to focus on pay adjustments. Too many PA systems fail because management expects too much from one method and does not determine speci¬cally what it wants the system to accomplish.

The next step in this ongoing cycle continues with establishing performance criteria (standards) and communicating these performance expectations to those concerned. Then the work is performed and the supervisor appraises the performance. At the end of the appraisal period, the appraiser and the employee together review work performance and evaluate it against established performance standards. This review helps determine how well employees have met these standards, determines reasons for de¬ciencies, and develops a plan to correct the problems. At this meeting, goals are set for the next evaluation period, and the cycle repeats.

Establish Performance Criteria (Standards)

There is an old adage that says “What gets watched gets done.” Therefore, management must carefully select performance criteria as it pertains to achieving corporate goals. The most common appraisal criteria are traits, behaviours, competencies, goal achievement, and improvement potential.


Certain employee traits such as attitude, appearance, and initiative are the basis for some evaluations. However, many of these commonly used qualities are subjective and may be either unrelated to job performance or dif¬cult to de¬ne. In such cases, inaccurate evaluations may occur and create legal problems for the organization as well. This was the case in Wade v Mississippi Cooperative Extension Service where the circuit court ruled: In a performance appraisal system, general characteristics such as leadership, public acceptance, attitude toward people, appearance and grooming, personal conduct, outlook on life, ethical habits, resourcefulness, capacity for growth, mental alertness, and loyalty to organization are susceptible to partiality and to the personal taste, whim, or fancy of the evaluator as well as patently subjective in form and obviously susceptible to completely subjective treatment by those conducting the appraisals.

At the same time, certain traits may relate to job performance and, if this connection is established, using them may be appropriate. Traits such as adaptability, judgment, appearance, and attitude may be used when shown to be job-related.


When an individual’s task outcome is dif¬cult to determine, organizations may evaluate the person’s task-related behaviour or competencies. For example, an appropriate behaviour to evaluate for a manager might be leadership style. For individuals working in teams, developing others, teamwork and cooperation, or customer service orientation might be appropriate. Desired behaviours may be appropriate as evaluation criteria because if they are recognized and rewarded, employees tend to repeat them. If certain behaviours result in desired outcomes, there is merit in using them in the evaluation process.


Competencies include a broad range of knowledge, skills, traits, and behaviours that may be technical in nature, relate to interpersonal skills, or are business-oriented. Some managers recommend that cultural competencies such as ethics and integrity be used for all jobs. There are also competencies that are job-speci¬c. For example, analytical thinking and achievement orientation might be essential in professional jobs. In leadership jobs, relevant competencies might include developing talent, delegating authority, and people management skills. The competencies selected for evaluation purposes should be those that are closely associated with job success.

Research conducted by the University of Michigan Business School and sponsored by the Society for Human Resource Management (SHRM) and the Global Consulting Alliance determined that success in HR is dependent on competency and speci¬c skills in the following ¬ve key areas:

Strategic contribution: Connecting ¬rms to their markets and quickly aligning employee behaviours with organizational needs.

Business knowledge: Knowing how businesses are run and translating this into action.

Personal credibility: Demonstrating measurable value; being part of an executive team.

HR delivery: Providing efficient and effective service to customers in the areas of staffing, performance management, development, and evaluation.

HR technology: Using technology and Web-based means to deliver value to customers.

Goal Achievement

If organizations consider ends more important than means, goal achievement outcomes become an appropriate factor to evaluate. The outcomes established should be within the control of the individual or team and should be those results that lead to the ¬rm’s success. At upper levels, the goals might deal with ¬nancial aspects of the ¬rm such as pro¬t or cash ¬‚ow, and market considerations such as market share or position in the market. At lower organizational levels, the outcomes might be meeting the customer’s quality requirements and delivering according to the promised schedule.

To assist the process, the manager needs to provide speci¬c examples of how the employee can further his or her development and achieve speci¬c goals. Both parties should reach an agreement as to the employee’s goals for the next evaluation period and the assistance and resources the manager needs to provide. This aspect of employee appraisal should be the most positive element in the entire process and help the employee focus on behaviour that will produce positive results for all concerned.

Improvement Potential

When organizations evaluate their employees’ performance, many of the criteria used focus on the past. From a performance management viewpoint, the problem is that you cannot change the past. Unless a ¬rm takes further steps, the evaluation data become merely historical documents. Therefore, ¬rms should emphasize the future, including the behaviours and outcomes needed to develop the employee, and, in the process, achieve the ¬rm’s goals. This involves an assessment of the employee’s potential. Including potential in the evaluation process helps to ensure more effective career planning and development. You should remember that the evaluation criteria presented here are not mutually exclusive. In fact, many appraisal systems are hybrids of these approaches.


The most known purpose of performance management is to improve performance of individuals. Performance management has basically two important purposes, from an organizational point of view: The maintenance of organizational control and the measurement of the efficiency with which the organization’s human resources are utilized. (Cummings and Shwab.1973 pg. 55) but ,there are also a variety of other declared purposes and desired benefits for appraisal, including: Improving motivation and morale of the employees, clarifying the expectations and reducing the ambiguity about performance, determining rewards, identifying training and development opportunities, improving communication, selecting people for promotion, managing career growths, counselling, discipline, planning remedial actions and setting goals and targets.(Bratton and Gold,2003:284, Bowles and Coates,1993).

However, according to Armstrong and Baron, there is rise in more harder and judgmental forms of performance management than softer and developmental approaches. Therefore there has been a shift in performance management away from using it for career planning and identifying future potential and increased use of it for improving current performance and allocating rewards.(Redman and Wilkinson,2001: pg.60) Performance management can be used as an effective tool to improve employees’ job performance by identifying strengths and weaknesses of the employees and determining how their strengths can be best utilized within the organization and overcome weakness over the period of time. The next question that comes into mind is that who gets more out of the appraisal process the organization or the employees?

Who obtains more gain out of it? Either the organization or the employees or both of them. The following study gives us an explicit understanding of the different purposes of performance management in the organizational context and highlights the different key features of performance management. It also helps us to know who benefits from the appraisal system.

Mcgregor (1972) in his paper, “An uneasy look at performance management” said that formal performance management plans are designed to meet three needs, one of the organizations and one two for the individual: The following are his ideas about PA. Firstly, PA provides systematic verdict to back up salary increases, promotions, transfers, demotions or terminations. Secondly, PA forms a means of telling subordinate how he is doing, how his performance is towards the organization and suggesting the changes in his behaviour, attitudes, skills or job knowledge improvements ,they let him know “where he stands” with the boss. Thirdly, PA is increasingly being used as a basis for coaching and counselling of the individual by the superior.

Similarly, Murphy and Cleveland (1995) studied how performance management is used in organization. They compared ‘between individual’ and ‘within-individual’ performances. The ‘between individual’ performances was able to provide information to make decisions regarding promotion, retention and salary issues. The ‘within individual’ performances was useful in identifying the training and development needs which includes performance feedback, identifying the strengths and weaknesses of employees as well as determining transfers. Another use of performance management was found out through this study was that of ‘ system maintenance’ which was used to identify the organizational goals and objectives, to analyze the organizational training needs and to improve the personnel planning system of the organization. Finally, documentation purposes are to meet the legal requirements by documenting personnel decisions and conducting validation research on the performance management tools.

Bowles and Coates (1993) conducted a postal survey of 250 West Midland hospitality companies in June 1992, where the organizations were asked questions pertaining to the use of PM in the organization. These questions included the perceived function of PA in the management of work, its strengths and weaknesses, the role of commitment in the management of work. Through their survey they found out that PA was beneficial in the following ways:

PA was beneficial in developing the communication between employer and employee,

It was useful in defining performance expectations and

Identification of training needs.

An important study in the field of employee’s performance management program was conducted by Redman et al (2000) on National Health Service Trust hospital (UK). In this study, they explained the effectiveness of performance management in public sector. Their research was mainly to check in what context does performance management hold an upper hand in proving its worth in the public sector. The results however were pretty surprising. The results obtained showed that performance management was considered as ‘organizational virus’. Nelson (2000) adds that PA largely helps the employee to have a focused and fixed approach towards the target goal. He elaborates that appraisal system acts like a boosting factor for the employee to do his job well. It recognizes the employee’s capabilities in order to achieve the given objective and function. It also helps in knowing the shortcomings of the employees and acts like an important element, for career development and planning.

How is PA conducted? Shudnt b a question

Performance management system should not merely be a checklist of ‘do’s and don’ts ‘, it should provide a wider perspective to the employees. Performance management has to be designed in such a way that, both, the employee and the organization can obtain fruitful results from it. A performance management system should be made in such a way that the organization can ensure proper accomplishment of goals; at the same time the employee can expect clear and concise work expectations. Knowing what is expected from them is the first step in helping one cope better with the stress usually associated with lack of clear divisions. (Baker, 1984)<


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